The rise of smart home technology

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Smart devices are revolutionizing property management, blending innovation with practical benefits to mitigate risks, lower repair costs, and transform how insurers assess claims and offer discounts

IN AN era where technology permeates every aspect of our lives, smart home devices are becoming a mainstay in rental properties. From smart thermostats to smart alarms, these technologies have had a transformative effect on property risk management, and insurers are taking notice. For Jason Jones, senior vice president of risk management at REInsurePro, these technologies are a valuable addition to the property management toolkit, though not a panacea. Insurance carriers, for their part, appear optimistic about the potential of these technologies to reduce claims. “It shouldn’t wholly replace the role of a property manager to visit the property regularly,” Jones said. “But it adds that extra layer. If I’m out of town or if my manager can’t get there, I have a few safeguards in place that could help out in a claim scenario.”

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“If you identify a water claim within an hour of it starting versus the next day, you’re likely talking tens of thousands of dollars difference in repair costs”

Jason Jones, REInsurePro

Jones emphasized the tremendous benefits of these technologies, especially when it comes to early detection. “That early response helps mitigate damage, reduces repair costs, and shortens the timeline of recovery – benefits that are in everyone’s best interest,” he said.

Water damage is a costly and common issue for property owners. Smart leak detectors are a relatively small investment compared to the financial fallout from undetected leaks. There are two main types of leak detection systems: Sensor-based systems, which are more affordable and easier to install, use sensors placed near high-risk areas, such as under sinks or next to appliances, and alert you if they detect moisture. Some models offer push notifications to your smartphone, while others make an audible alert.

Water-main systems, on the other hand, can detect changes in water pressure throughout the entire property. Though more expensive, these systems are highly advanced, automatically shutting off the water supply if unusual water pressure is detected, preventing costly leaks. Basement flooding is a nightmare for any property owner, but smart sump pumps offer an effective defense. These devices detect rising water levels and pump excess water out before any significant damage occurs. What makes smart sump pumps unique is their connectivity. They can alert homeowners via mobile notifications if water levels rise unexpectedly or if the pump malfunctions. Some models also include backup power sources to ensure continued operation during power outages, which are common during storms.

When it comes to water damage, Jones pointed out that early intervention can make all the difference. “If you identify a water claim within an hour of it starting versus the next day, you’re likely talking tens of thousands of dollars difference in repair costs,” he said. Smart thermostats are another notable innovation that property managers should investigate, especially in winter when frozen pipes pose a significant risk. “Once a home reaches a certain temperature, you’re really at risk of frozen pipes, along with the water damage that could potentially affect the property,” Jones said. Traditional smoke detectors are critical safety tools, but smart detectors elevate this functionality to a new level. They can detect smoke or carbon monoxide and send immediate alerts to your phone, regardless of your location.

For insurers, the rising prevalence of smart devices is prompting new ways to assess risk and reward proactive behavior. While the integration of these technologies into insurance frameworks is still evolving, progress is being made. “Some carriers are interested in providing a discount or a rebate for installing these devices,” Jones said. He also highlighted how some tech companies offer installation for free in exchange for access to data, which they can then present to insurers to demonstrate the efficacy of their products. This symbiotic relationship between technology providers and insurers could accelerate adoption among property owners.

In the same vein, smart carbon monoxide (CO) alarms can detect harmful gas and send real-time alerts to your smartphone, so you will know if there is a problem even if you are not physically present at the property. Carbon monoxide is known as a silent killer, which makes it crucial to have a reliable detection system to keep occupants safe and avoid liability risks. Finally, connected security devices like smart locks and security cameras are also gaining traction. They can be especially useful for vacant properties, such as those undergoing renovation, where risks like water intrusion or unauthorized access are heightened.

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Installing smart home technologies – what are the insurance benefits?

Published December 2, 2024

“I could see a world where you could get insurance discounts if you have, say, smart locks, lighting systems, or security cameras. These devices show that you’re managing the property appropriately”

Jason Jones, REInsurePro

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Additionally, smart devices offer insurers greater confidence in property owners’ ability to manage risk proactively. “The insured feels more comfortable that their property is protected, and the insurer benefits from potentially lower claim payouts,” Jones said. Jones believes the future holds even greater integration of smart home devices into the insurance industry. As carriers gain a deeper understanding of the benefits these technologies bring, new policies and discounts are likely to emerge. This could be especially relevant in high-risk markets, where demonstrating proactive risk management through smart devices might help property owners secure better terms.

“The discounts could come in the way of a deductible, or maybe a percentage of your premium is then taken off,” he suggested. “I could see a world where you could get insurance discounts if you have, say, smart locks, lighting systems, or security cameras. These devices show that you’re managing the property appropriately.” Still, some property owners are balking at the upfront costs of smart home devices. Jones shared pragmatic advice that insurance brokers can pass on to clients. “I’d recommend looking into smart technologies offered through programs where installation is included, leaving you with just an annual maintenance fee. That cost is minor compared to the potential loss,” he pointed out. “Identifying the loss occurring is important, but beginning the mitigation progress to limit additional damage is almost as impactful, and can mean less time spent coordinating investigations and fixes. It’s similar to choosing a deductible – saving a little monthly by increasing it might seem smart until you’re faced with a claim and wish you’d opted for the lower deductible.”

Despite these benefits, Jones is quick to caution against over-reliance on technology. He urged insureds to do their research before choosing the smart devices they install. “There’s value in researching the companies you choose to partner with, focusing on how they manage their technology,” Jones said. “It’s also crucial to remember that technology should not entirely replace the role of a property manager. Regularly inspecting the property to ensure the actual conditions align with what the technology reports remains essential.” By balancing technology with hands-on risk management, property owners can maximize the benefits of these innovations while minimizing claims and reaping the rewards in their insurance premiums.

Technology not a ‘replacement’ for risk management

Smart devices at a glance

Leak detectors Alerts for water leaks Smart thermostats Help to prevent frozen pipes Smoke/CO alarms Immediate danger alerts Smart sump pumps Flood and sewer/drain backup prevention

Does your carrier offer discounts for smart devices? Are rebates available for installations? Could smart devices lower your deductible?

insurance benefits for smart home devices